03 Aug 2015
Adrian Sangster, Leasing Director, comments on a recent announcement affecting landlords.
In addition to cutting tax relief on mortgage interest, the UK Government also confirmed in the summer budget that the wear and tear allowance for landlords of furnished rental properties (which allows 10% of rental profits to be discounted) will be scrapped in April 2016.
Changes to the allowance
It is being replaced with a new kind of furniture relief allowance which only allows landlords to deduct actual incurred costs when they are forced to replace furnishings and fixtures in rental properties.
The wear and tear allowance currently only applies to landlords of fully furnished rental properties. However, the proposed change means that the relief will apply to all landlords, no matter what level of furnishings are provided.
The HMRC have published a detailed consultation document and are inviting landlords, letting agents, tax advisors, professional bodies and other interested parties involved in the private rented sector to take part. The consultation document can be found here and closes on 9th October 2015.
Points of view
Landlords who offer unfurnished and part furnished properties will probably view these changes positively, however those who have fully furnished properties are most likely to face a higher tax bill, and therefore will not welcome the proposed changes.
Industry bodies who represent landlords and letting agents are asking the Chancellor to reconsider these amendments because of the concerns that they will have a serious impact on the supply of properties in the sector.